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N.C. AG argues Duke wants too much in rate increase

By Emery P. Dalesio

AP Business Writer

RALEIGH — Pressure could increase on North Carolina utilities regulators to justify decisions to charge customers hundreds of millions of dollars more as part of a case the Supreme Court heard Tuesday.

State Attorney General Roy Cooper’s office argued that there’s little evidence the North Carolina Utilities Commission independently analyzed the consumer impact of allowing Duke Energy to raise electricity rates for its 1.8 million customers by 7.2 percent. The commission is responsible for balancing the interests of both customers and investors in what are regional monopolies, while ensuring the companies are healthy enough to maintain a system of constant electricity supply.

The Supreme Court can reverse the commission’s January decision to allow the rate increase, which generates an extra $309 million a year for the country’s largest electricity company. The increase included a 10.5 percent profit for Duke Energy’s subsidiary operating in most of the state from Durham west, but pushed typical residential bills up by $84 a year to almost $1,236.

“Consumer interest is supposed to be on a level playing field with shareholder interests,” Cooper’s consumer protection division head Kevin Anderson told the court’s seven justices. “Yet we had expert testimony here that only focused on the impact to the utility’s credit rating and shareholder interest.”

While hundreds of consumers last year objected that Duke Energy’s requested increase would pile misery atop high unemployment and home foreclosures, the utilities commission’s order approving the lower rate increase doesn’t specify what weight it gave those warnings, Anderson said.

There is “this notion put forward that when it comes to consumer interests the commission’s findings and conclusions don’t have to be specific. They can sort of be vague,” Anderson said. Justices should question “did the commission do what it said it did, and if so is there any evidence as to how it factored that in?”

Duke Energy sought the price increase after capital investments of $4.8 billion for power plant modernization, environmental compliance, and other construction projects approved by state regulators since 2009.

Lawyers for the utilities regulator and Duke Energy told the court the impact of higher rates was considered and the company’s earlier 15.2 percent increase request reduced. The lesser rate increase and concessions to help poor households approved by the Utilities Commission were negotiated by the regulator’s division that advocates for consumers, the Public Staff.

Attorneys for the Public Staff and Duke Energy played the unusual role of sitting together before the Supreme Court and arguing their deal benefited all sides.

“What the attorney general is in fact doing here is seeking to obtain all the benefits to residential customers of the settlement reached with Public Staff but to slough off any burden that’s associated with that settlement. It’s a package,” said Duke Energy’s attorney, Kiran Mehta.

Since the utilities commission was created by law to balance several interests and set rates, its decisions are “by definition just and reasonable,” Mahta said.

North Carolina’s attorneys general have rarely challenged utility rate increases to the Supreme Court. The last time may have been 1988 involving another Duke rate case, said a spokeswoman for Cooper, who took office in 2001.

This case comes at a time that both Duke Energy and the utilities commission are under fire.

Cooper’s office and the utilities commission are running separate investigations into whether Duke Energy misled regulators ahead of its takeover of Raleigh-based Progress Energy, which was finalized in July. Hours after the deal was concluded, Duke Energy’s board ousted the CEO promised throughout the 18-month process of combining North Carolina’s two Fortune 500 energy companies.

Duke Energy now has 7.1 million residential and business customers in North Carolina, South Carolina, Ohio, Kentucky, Indiana and Florida.

The utilities commission was criticized for being too ready to accommodate the company’s merger timetable and rushing through its duty to ensure the deal was in the state’s best interest.

The electricity giant and its regulator are expected to have multiple rate cases in the coming years as Duke Energy seeks to update its power generation portfolio in “an extended period of extremely large investments,” Duke CEO Jim Rogers said last year.